The trend of music artists selling their catalogs remains as hot as the L.A. summer, and the most zealous buyers are companies panning for ownership of songwriting and publishing rights they can turn to gold across an ever-expanding media landscape.
More than $2 billion has been raised in announced deals so far in 2023, which started with a bang when Hipgnosis Songs Fund bought Justin Bieber’s entire catalog for more than $200 million and has continued with deals like BMG’s purchase of a substantial stake in Paul Simon’s Simon & Garfunkel rights. Recent buzz on the street is that Universal Music Group in advanced talks to acquire Queen’s catalog for a figure north of $1 billion.
Purveyors range from major record companies to indie publishers like Primary Wave Music to investment firms from behemoth KKR
At the core of each of these deals is a landslide of data analysis.
Companies looking to purchase a catalog could be wading through a potential 20 offers—and the requisite royalty statements—or more as they assess a single desired deal and the price point they want to bring to the table. And that’s just step one. Once a catalog is acquired, they need to ensure they are working with clean data to optimize their return on investment.
Enter RYLTY. The fintech startup recently shifted its business model from working with artists to unearth uncollected royalties to exclusively aiding rights holders to collect, clean, merge and analyze royalty data so they can best optimize their time and resources.
“For us, it all comes down to royalty administrators, and in the case of our target market, it’s these large music investors who are buying catalogs and their royalty admin team,” says Nicholas Judd, RYLTY co-founder and CEO.
“A lot of the technology coming out is trying to replace those people and this is a very complicated problem that, even with the advances in AI, there are so many things
that are not in the black and white. They’re in the grey, they really require a human to manage. RYLTY is building software that gives those royalty administrators a fighting chance. Because right now they’re getting buried.”
RYLTY’s clients include HarbourView Equity Partners, which just snapped up the catalogs of Nelly, and Wiz Khalifa; Tempo Music Investments, which owns rights to acts including Florida Georgia Line and Brett James; and Influence Media Partners, which recently purchased rapper and producer Logic’s catalog.
Its offerings include modular solutions for managing music asset rights, a portal where rights holders can corral all their music assets and an error analysis and correction solution.
“The nature of a lot of these private-equity-backed funds that are in the space is they try to keep head count low. But at the same time there’s an enormous amount of data they have to go through. Not just the catalog they purchased and running analysis on the results of the royalties generated by those catalogs—that alone is a tremendous amount of work—but they have to take royalty statements that are largely PDF, convert them to CSV, which is a messy process, clean that up and then reformat those results into something they can actually use,” Judd says.
“And they have to do that every single time a royalty statement comes out, for all of the catalogs they’ve purchased. On top of that, those same typically one or two administrators are also in charge of the due diligence for catalogs they’re thinking about acquiring. So that’s going to be tons of files and maybe even 100 royalty statements depending on what rights they are buying and how far back they want to look as part of their due diligence,” he adds.
“We have already built the technology to automate that process and offload that from them, so there’s a tremendous value-add. The bonus is all of their data lives in our portal which gives easy access to analyze it and find where all those errors are without needing external inputs that may slow down the process.”
Once a catalog purchase is made, there are two ways for investors to increase its value: Finding new and better revenue streams, and fixing embedded problems that are preventing select royalties from coming up and enabling the royalty streams to reach their true value rather than a discounted value due to errors.
RYLTY is focused on the latter, enabling companies to have clean data so they can create analytics they can then pass on to their investors, and finding those errors and in most cases helping to fix those errors that are causing the suppression of royalties.
“They want to be able to analyze these assets they have purchased to see how well they are doing, so they can report to their investors that they have been a good steward of that investor’s money,” Judd says of music rights holders.
“Many of them want to go out and raise more money and the only way you can show that is by proving to investors that want to be in this space that you’re the person they should park their money with.”